The IRS recently published Revenue Procedure 2019-09, which is the Service’s annual pronouncement identifying the circumstances under which a disclosure on a taxpayer’s income tax return will be deemed sufficient for purposes of reducing an understatement of income tax for purposes of the accuracy-related penalty imposed under Section 6662(d) of the Code and for purposes of the return-preparer penalty imposed under Section 6694(a) of the Code.
Revenue Procedure 2019-09, § 4.02 identifies the tax items subject to its provisions. When the amount of an item is placed on a line that does not have a pre-printed description on the return or schedule identifying the item, the taxpayer is required to clearly identify the item by including a description on the line where the amount is reported. For example, to disclose a bad debt for a sole proprietorship, the taxpayer must type or write the words “bad debt” on the line on Schedule C where the bad debt is reported. No additional disclosures of facts relevant to an item covered by the Revenue Procedure is required provided the forms and attachments are completed in a clear manner and in accordance with all applicable instructions. The Service is careful to note that although a taxpayer may literally satisfy the disclosure requirements in Revenue Procedure 2019-09, the disclosures on the tax return will not permit avoidance of the Section 6662 accuracy-related penalty or the Section 6694 return-preparer penalty if the item or position on the return: (i) does not have a reasonable basis as defined in the Regulations; (ii) is attributable to a tax shelter; or (iii) is not properly substantiated or where the taxpayer failed to keep adequate books and records.
J. Eric Butler is a Shareholder in the firm focusing his legal practice in the areas of federal and state taxation, business formations and commercial litigation, tax controversy matters, white collar criminal defense, and estate planning/probate matters. Mr. Butler handles a large range of tax matters for clients across the United States involving the Internal Revenue Service and state taxing authorities, to include examinations of returns, collection of delinquent tax debts, criminal tax matters, international tax compliance and enforcement, and litigation of tax issues in both state and federal courts. Mr. Butler also represents accountants across the United States in malpractice defense, mitigation of potential malpractice claims, and disciplinary proceedings.
Mr. Butler received a three-year appointment (2013 through 2015) to the Taxpayer Advocacy Panel, which is a federal advisory panel established in 2002 under the authority of the U.S. Department of the Treasury. The Taxpayer Advocacy Panel (TAP) is made up of volunteers appointed by the Secretary of the Treasury to represent all 50 states, the District of Columbia and Puerto Rico. TAP members are assigned to separate Project Committees and include at least one representative from each state. Mr. Butler served on the Tax Forms & Publications Project Committee during his three-year term, which works to provide feedback to Internal Revenue Service on issues involving tax administration and improvements to tax forms and publications. In 2015, Mr. Butler served as Vice-Chair of the Tax Forms and Publications Project Committee. In 2016, Mr. Butler was awarded the President’s Volunteer Service Award for his contributions to TAP during his three-year term.
Mr. Butler is a frequent speaker to various organizations and businesses on issues involving tax law, business law, and estate planning/probate matters.